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Central Government allowed Tesco to invest in brownfield entity

Government of India allowed British retailer Tesco to invest in brownfield entities in India.

Jan 6, 2014 16:52 IST
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Government of India allowed British retailer Tesco to invest in brownfield entities in India. Tesco could now invest up to 50 percent of the total Foreign Direct Investment (FDI).

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Government of India has amended its current provision of FDI. Out of the total FDI, 50 per cent has to be mandatorily invested in back-end infrastructure such as warehouses, supply chain and logistics. This would be in addition to investments in front-end greenfield assets such as retail stores.

Previously, it was mentioned that the front-end retail stores must also be set up as an additionality and not through acquisition of existing stores.

According to the current policy, a foreign investor in the multi-brand retail sector can invest 51 per cent, the minimum investment size being 100 million dollar.

Tesco, the world's third-largest retailer, has a franchise agreement to provide support to Trent's Star Bazaar chain. Initially, Tesco would open stores at Karnataka and Maharashtra.

Investment in an existing asset or company is termed as brownfield investments.

Greenfield investment is a form of FDI where a parent company starts a new venture in a foreign country by constructing new operational facilities from the scratch. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees.

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